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EXCLUSIVE-Mexico energy reform draft spans profit-sharing to licenses

Source: Reuters - Sat, 7 Dec 2013 04:34 PM
Author: Reuters
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(Updates with lawmaker quotes, context)

By Simon Gardner and Dave Graham

MEXICO CITY, Dec 7 (Reuters) - Lawmakers from Mexico's ruling centrist party and opposition conservatives have reached agreement in principle on a draft energy bill that includes contracts ranging from profit-sharing and risk-sharing to licenses, a top lawmaker told Reuters on Saturday.

The bill, which would keep ownership of crude in state hands, is at the center of an economic reform drive that President Enrique Pena Nieto hopes will boost long-lagging growth in Latin America's No.2 economy.

Lawmakers from the Pena Nieto's ruling Institutional Revolutionary Party (PRI) and the conservative National Action Party (PAN) were due to meet later on Saturday to present the bill, and were expected to start debating it on Sunday.

"We have left it multifunctional. It will be profit-sharing, risk-sharing and licenses and payment will be made to the Mexican state," the lawmaker said on condition of anonymity because of the sensitivity of the issue.

The bill, which would allow private investors to drill for the country's oil, keeps ownership of crude in state hands, lawmakers told Reuters.

David Penchyna, leader of the Senate's energy committee and a member of Pena Nieto's Institutional Revolutionary Party, said the parties had agreed to a "very big" reform he described as one of the most important in the last 60 years.

He said however there were still some details that remained to be debated, such as union representation on the board of state oil monopoly Pemex and a sovereign fund to hold Mexico's oil revenue.

"Companies are going to be able to invest across the whole chain," Penchyna told Reuters. "Mexico cannot remain behind ... and thanks to this reform will be able to better take advantage of its resources."

He said that the under the reform the state would retain "ownership and economic control over its energy resources ... to generate more value and increase revenues for the nation."

In August, the PRI proposed offering contracts that would give private companies a share in profits from oil extraction, which was viewed by companies and analysts as too tame. The PAN meanwhile called for full-blown concessions.

This week the two sides converged toward a middle ground.

As the parties were negotiating, Jorge Lavalle, a senior PAN energy expert in the Senate, told Reuters on Friday companies would not be able to book reserves - a key wish of multinational companies.

"They won't be able to book reserves of hydrocarbons coming from Mexico because hydrocarbons are and will remain property of the nation," he said.

The government does not have a majority in Congress, and needs the PAN's votes to push the bill through after the country's main leftist party, the Party of the Democratic Revolution (PRD), which is against opening up the oil sector, pulled out of talks.

Crude output at Pemex has fallen by a quarter since peaking at 3.4 million barrels per day in 2004, and its management says it needs a huge injection of capital.

Many Mexicans believe the plan is a covert bid to sell off the company, which despite a string of corruption scandals over the years has remained a potent national symbol. (Additional reporting by Ana Isabel Martinez; Writing by Simon Gardner; Editing by Vicki Allen)

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